Safe and Sound

Cornerstone Bank, Inc.

West Union, WV
4
Star Rating
Cornerstone Bank, Inc. is an FDIC-insured bank started in 1934 and currently based in West Union, WV. Regulatory filings show the bank having equity of $17.1 million on assets of $164.2 million, as of December 31, 2017.

Thanks to the efforts of 28 full-time employees in 4 offices in WV, the bank has amassed loans and leases worth $36.2 million, $30.4 million of which are for real estate. U.S. bank customers currently have $144.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Cornerstone Bank, Inc. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is key. It acts as a cushion against losses and as protection for accountholders when a bank is experiencing financial instability. From a safety and soundness perspective, more capital is preferred.

Cornerstone Bank, Inc. fell below the national average of 13.13 on our test to measure capital adequacy, racking up 12 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Cornerstone Bank, Inc.'s Tier 1 capital ratio was 29.72 percent, higher than the 6 percent level regulators consider adequate, and above the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Cornerstone Bank, Inc. held equity amounting to 10.40 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due loans.

A bank with extensive holdings of these kinds of assets could eventually have to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.

Cornerstone Bank, Inc. scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.04 percent of Cornerstone Bank, Inc.'s loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Cornerstone Bank, Inc.'s loan loss allowance was 2,423.08 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's ability to earn money affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's test of earnings, Cornerstone Bank, Inc. scored 12 out of a possible 30, failing to reach the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity. Cornerstone Bank, Inc.'s most recent annualized quarterly return on equity was 5.81 percent, below the national average of 8.10 percent.

The bank recorded net income of $989,000 on total equity of $17.1 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.60 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.